Cash Pouring Back Into Russian Stocks As Post-Election Angst Evaporates

Seven straight weeks of positive fund flows into Russia demonstrates that we are a long way from the protests and investor retreat that surrounded last year’s parliamentary elections.

For the next few months, politics look like it will be safely in the rear view mirror in Moscow. Headlines are all about reform, not outrage.

And the Russian stock market — as embodied by funds like the Market Vectors Russia ETF (NYSEARCA:RSX) — is up 27% year to date.

Western capital has driven the boom as fund managers push to put new allocations to work. Dedicated Russia ETFs and mutual funds took in a net $58 million last week, much of it going into stocks that do not trade in the United States like Bashneft, Zhaikmunaigas and FESCO.

One Russian stock that U.S. investors can trade is of course cellular communications carrier Vimpelcom (NYSE:VIP), but it might not be a prize right now.

VIP is earning a lot of downgrades in Moscow for failing to improve its margins last quarter, even though the stock is still cheap on a fundamental basis. The problem here is a lack of upside catalysts and lingering negativity surrounding the company’s expensive purchase of Algerian phone assets that are now being nationalized.

The boots on the ground recommend that money looking for Russian telecom exposure look at rival Mobile Telesys (NYSE:MBT) instead.

Perversely, MBT is not quite as cheap as VIP — relative P/E ratios are running at about 12 to 11 times earnings — but without the tailwind of a bad acquisition pushing it down.